The U.S. dollar took the crown this week against the other major currencies, likely a reaction to growing fears of another pandemic wave, and possibly on rising expectations of Fed tightening next year as U.S. economic conditions improve.
Notable News & Economic Updates:
- Oil slips as Europe lockdowns dim demand recovery hopes
- As vaccine battle with UK deepens, EU blames AstraZeneca
- Turkish lira plunges after Erdogan sacks hawkish central bank chief
- Deutsche Bank: Bitcoin Now 3rd Largest Currency, Too Important to Ignore
- Boris Johnson says Europe third wave likely to hit UK as he calls Merkel and Macron
- Covid cases rise across more than half of the U.S. as country races to vaccinate
- Housing reforms announced by New Zealand gov’t to curb property price surge
- Fidelity to launch bitcoin ETF as investment giant builds its digital asset business
- Treasury yields fall following Fed Chair Powell’s comments on the economy
- Germany to go into hard Easter lockdown as Covid-19 infections soar
- China iron ore demand softens but trade surplus firmly above $8b
- Eurozone economy returns to growth for first time in six months
- Dow jumps more than 300 points as reopening plays rebound
- Suez Canal blockage lifts WTI crude oil back above $60 per barrel before retreating
- Oil prices rise over 3% on fears Suez blockage may last weeks
- SNB tones down intervention language as franc pressure eases
- CDC director warns of possible Covid surge as U.S. cases increase by 7%
Low Volatility & Break from Recent Correlations
Without a fresh, major catalyst, intermarket price action was mostly choppy this week, and volatility in most asset classes continued to dip lower. It was also a step away from recent behavior where bond yields was the leading driver, likely a re-focus by traders back to negative COVID-related developments and headlines.
On Monday and Tuesday, COVID concerns grew in Europe as Germany announced a fresh lockdown, and in the U.S. as case grew across more than half of the country. This was likely the main catalysts that drove bond yields lower, as well gold and oil, while the Dollar and bonds benefited.
We also got comments from Fed Chair Powell on Tuesday, re-iterating that the economy is progressing faster than generally expected, leading another leg lower in bond yields on the session.
We continued to get negative COVID-related headlines through the rest of the week (e.g., BioNTech Vaccines Suspended in Hong Kong, France puts region around Lyon under tighter COVID restrictions, Chile locks down Santiago with new cases new pandemic worst), as well as geopolitical headlines (e.g., North Korea launched two ballistic missile tests, EU imposes China sanctions over Xinjiang abuses, Massive ship blocking the Suez Canal) that likely contributed to a risk-off lean overall, and likely why the Greenback was able to out perform the other majors by the close on Friday.
U.S. Dollar Wins This Week
As mentioned above, the Greenback was the clear winner as it out performed all of the major currencies heading into the weekend. And with the markets generally leaning risk-off, the Japanese yen wasn’t too far behind.
The “Loser of the Week” title goes out to the New Zealand dollar, taking a huge hit early in the week after headlines popped up on Tuesday that the New Zealand government would take measures to cool the red hot housing market. With that and the broad risk aversion sentiment driving the markets this week, Kiwi bulls didn’t stand a chance of recovering.
USD Pairs
- U.S. economy is ‘on the brink’ of a complete recovery, says Richmond Fed’s Barkin
- U.S. existing home sales drop sharply; prices surge
- Powell says economy recovering but Fed support still needed
- U.S. new home sales plunge amid harsh weather
- Fed’s Kaplan said he expects an interest rate hike in 2022
- Fed’s Bullard sees fast growth this year as pandemic nears end
- U.S. New order growth fastest in 6½ years, but supply chaindisruptions limit manufacturing output
- Fed officials press promise of complete recovery before ‘punch bowl’ disappears
- U.S. weekly jobless claims drop to one-year low in boost to economy
- U.S. Congress approves extension of small business Paycheck Protection Program
- Cold weather depresses U.S. consumer spending; inflation muted
GBP Pairs
- Boris Johnson says Europe third wave likely to hit UK as he calls Merkel and Macron
- UK unemployment falls for first time in Covid-19 pandemic
- UK manufacturing shows new signs of life in March: CBI
- UK private sector returns to growth in March, led by fastest increase in
- service activity since August 2020
- Economy will bounce back as people spend again – BoE’s Haldane
- U.K. Retail Sales Post Partial Rebound After Lockdown Plunge
EUR Pairs
- German tourist industry warns of job losses from tighter pandemic lockdowns
- ECB boosts bond-buying after pledge to fight yield gains
- ECB’s Knot says accelerated bond purchases temporary until growth recovers
- ECB official Lane: Eurozone facing difficult quarter but central bank will do its part
- Germany to go into hard Easter lockdown as Covid-19 infections soar
- Eurozone economy returns to growth for first time in six months
- Softer decline in French business activity as new orders stabilise
- Euro zone economy may rebound strongly if vaccination speeds up, ECB’s de Guindos says
- Germany’s ifo Business Climate Index highest since June 2019
CHF Pairs
- SNB tones down intervention language as franc pressure eases
CAD Pairs
- Bank of Canada announces the discontinuation of market functioning programs introduced during COVID-19
- Bank of Canada concerned about FOMO in Canada housing market
- Canada budget deficit swells to C$268 bln over first 10 months of 2020/21
NZD Pairs
- New Zealand consumer confidence edged back in Q1 2021
- Housing reforms announced by New Zealand gov’t to curb property price surge
- New Zealand credit card spending slumped 12.4% year-over-year
- New Zealand posts 181M NZD trade surplus after 647M NZD deficit in January
AUD Pairs
- Major floods in Australia led thousands to be evacuated
- Australian PMIs: Stronger inflow of new work boosts output growth in March
- China iron ore demand softens but trade surplus firmly above $8b
JPY Pairs
- BOJ core CPI printed 0.2% dip as expected
- Japan unveils steps to back financing at bigger firms hit by pandemic
- Japan’s factory activity picks up in March on growing output, orders – flash PMI
- BOJ Governor Kuroda: Central bank to buy ETFs as needed
- Tokyo core consumer prices fall at slower pace in March
- BOJ forms panel to help guide central bank digital currency experiment
